Last week equity markets sold-off after a sudden plunge in the Nikkei 225 on Thursday prompted traders around the world to take profits. The global political and economic outlook has been steady lately, so when traders witnessed the quick collapse of the Japanese market, they made rushed for the exit. Dealers enjoyed riding the bullish wave high in recent months, and many were asking: when it is going to end? So the bump on the road spooked some investors.
We can expect a number of important economic indicators in the week ahead. On Tuesday, China will reveal the latest industrial production, fixed asset investment and retail sales figures. The economy is on track to achieve to 6.5% annual growth rate in 2017. The high import levels that were posted last week assisted basic resource companies.
The pound has been gaining ground versus the US dollar since March and the UK CPI figures on Tuesday, and the unemployment and wages data on Wednesday could reignite interest in the currency pair. The weakness in the pound over the past year has contributed to the high inflation rate. The wages numbers might be the best way to gauge what the Bank of England (BoE) will do next. Low wage growth is likely to keep the BoE is dovish mode.
Thursday will see the release of the eurozone CPI report, and the forecast is for a drop to 1.4% from 1.5%. Mario Draghi, the President of the European Central Bank (ECB), has expressed concern for weak inflation rate in the region. Mr Draghi has left the door open to further monetary easing, should it be required, so the CPI report may provide a clue as to what the ECB will do down the line.
Oil drifted lower towards the end of last week but bullish sentiment still remains. Last week, Brent crude oil closed above its 200-week moving average, $62.71 – it hasn’t closed above that metric since June 2014. WTI is eyeing its 200-week moving average at $58.40. Dealers are concerned the purge in Saudi Arabia could lead to the country pushing for an extension to the OPEC production cut. OPEC’s next meeting is to take place on the 30th November, and traders are speculating the production freeze will be pushed beyond the end of Mach 2018 deadline. US oil production is expected to rise by 3.3% in 2017, and is tipped jump by a further 8.7% in 2018 – this is counteracting the bullish mood somewhat.
EUR/USD – has been in decline for the past two months, and the next level of support might be found at 1.1479. Rallies may encounter resistance at the 100-day moving average at 1.1725. Beyond 1.1725, the next resistance could be found at the 50-day moving average at 1.1800.
GBP/USD – is still in its upward trend and while it is above the 1.3000 mark, the outlook may remain positive. Rallies may incur resistance at 1.3335. A break below 1.3000 could send it to 1.2900.
EUR/GBP – is edging towards the 50-day moving average at 0.8900, and if that level is cleared it could target 0.9000. Moves lower could find support at the 200-day moving average at 0.8770 or 0.8733.
USD/JPY – has been pushing higher since early September, and 114.73 could be the next level to watch. A break above 114.73, might see the market target 115.62 and support may come into play at 113.00. The next support level below that could be the 200-day moving average at 111.77.
FTSE 100 is expected to open 28 points higher at 7460.
DAX is expected to open 10 points higher at 13137.
CAC 40 is expected to open 6 points higher at 5386.
IBEX 35 is expected to open 6 points higher at 10098.
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